Currency Pairs Market Analysis

European Markets Edge Higher as ECB Minutes Loom

In European financial circles, there was a modest uptick in stock values on Thursday. The STOXX 50 index saw a slight increase of 0.1%, reaching 4,355 points—a peak not observed since August 10th. Similarly, the broader STOXX 600 index climbed by 0.2%, marking a new two-month high. Contributing to this trend, recent PMI surveys indicated a slower contraction in Eurozone business activities for November. Notably, there was a downturn in employment for the first time since early 2021, alongside a six-month peak in input cost inflation. The financial community is now keenly awaiting the ECB's October meeting minutes.

On the corporate front, notable developments included Virgin Money's annual profits falling short of expectations, Jet2's operating profit soaring by 19%, and Endesa revising its profit forecast downwards. Outside of the immediate financial sector, political developments in the Netherlands captured attention, particularly the exit polls suggesting a significant rise in support for Geert Wilders' right-wing populist Freedom Party.​

South Africa Holds Repo Rate Steady Amid Inflation Concerns

In a move that aligned with broad expectations, the South African Reserve Bank (SARB) decided to keep its key repo rate steady at 8.25% on November 23rd, 2023. This decision marks the third consecutive time the rate has been held at this level, reflecting the bank's strategy to stabilize inflation expectations in the country.

Governor Kganyago noted that inflation risks are still perceived as high. Meanwhile, the balance of risks regarding the medium-term domestic growth outlook remains even. Notably, headline inflation in South Africa saw a significant rise to 5.9% in October, reaching a five-month peak. This rate is inching closer to the upper limit of the central bank's target range of 3% to 6% and moving away from the 4.5% midpoint, which is the bank's preferred level for anchoring inflation expectations.

The central bank has adjusted its inflation forecast slightly downward to 5.8% for this year, a small decrease from the previous estimate of 5.9%. Looking ahead to 2024, the forecast is set at 5%, a minor revision from the earlier prediction of 5.1%. The forecasts for 2025 and 2026 project a stabilization of the inflation rate at 4.5%.

In terms of economic activity, the SARB has also revised its GDP growth forecasts. For 2023, the growth forecast has been increased from 0.7% to 0.8%, and for 2024, it has been adjusted from 1% to 1.2%.

Assessing the Impact on the Economy

The decision to maintain the repo rate can be seen as a cautious yet optimistic approach towards managing inflation without hindering economic growth. By keeping the rate steady, the SARB aims to ensure that inflation doesn't spiral out of control while also supporting economic recovery and growth. This balance is crucial for maintaining economic stability and fostering a favorable environment for investment and development.​
NZD Gains Strength as RBNZ Focuses on Inflation

The New Zealand dollar experienced a notable increase this Friday, maintaining a value around $0.605. This marks the second week of significant growth, fueled by expectations that the nation's central bank will maintain its aggressive stance against persistent inflation in their upcoming end-of-year monetary policy meeting.


In October, the Reserve Bank of New Zealand (RBNZ) kept the cash rate steady at 5.5% for the third time in a row. However, they warned that consumer price inflation was still too high. To manage this, they suggested that interest rates might need to remain high for an extended period to bring inflation within the target range of 1 to 3%.

Meanwhile, the recent changes in government in Wellington have led to a shift in policy direction. The new coalition government has revised the central bank's dual mandate, which previously included both inflation and employment concerns, to now solely focus on price stability.

Over in China, government advisors are preparing for an important annual meeting in December. They're expected to set the GDP growth targets for the upcoming year, with projections ranging between 4.5% and 5.5%. This move is part of Beijing's broader strategy to stabilize demand and address the challenges in the real estate sector.​

The Japanese yen remained stable, hovering around 149.5 against the dollar, following a lukewarm market response to new economic data. This data revealed that Japan's headline inflation rate rose to 3.3% in October, up from 3% in September, marking the highest rate since July. Additionally, initial reports indicated that business activity in Japan experienced a slowdown in November, reaching an 11-month low, particularly due to ongoing challenges in the manufacturing sector.


The Bank of Japan, during its October policy meeting, confirmed its dedication to maintaining supportive monetary policies. It made subtle changes to its approach to yield curve control. Specifically, the Bank redefined the 1% level on 10-year Japanese Government Bonds (JGBs) as a flexible "upper bound" rather than a strict limit, and decided to discontinue its commitment to purchase an unlimited number of bonds to maintain this level.

On an international scale, investors are also closely monitoring the United States Federal Reserve's monetary policy. This focus comes in the wake of varied economic indicators emerging from the US, which continue to influence global financial decisions and trends.​
Swiss Franc Climbs High: November 2023's Financial Outlook

In November, the Swiss franc reached 0.88 against the US dollar, marking its strongest position in over two months. This rise was primarily influenced by the widespread weakening of the dollar, spurred by a series of weaker economic indicators. These indicators have led to increased speculation that the Federal Reserve might start reducing interest rates by the second quarter of 2024.

Within Switzerland, the economic landscape also contributed to the franc's trajectory. The country's restrained inflation rate, which remained under 2% for the fifth month running in October, coupled with a stagnating economy, limited the support from monetary policy for the franc. Specifically, the Gross Domestic Product (GDP) of Switzerland showed no growth in the second quarter.


Moreover, the easing of tensions in the geopolitical conflict between Israel and Gaza played a role in reducing the demand for the franc as a safe-haven currency. This situation led to the franc trading near its lowest in four months against the euro. Despite these various factors, the franc is projected to end 2023 stronger against both the dollar and the euro. This strength is largely attributed to the Swiss National Bank's (SNB) reduction in foreign currency reserves, which dropped to their lowest in nearly six years in October.​
CAD Strengthens as Inflation and Growth Slow

Solid ECN - As November drew to a close, the Canadian dollar found itself trading at approximately 1.37 against the US dollar, marking a notable recovery from its near one-year low point of 1.386, recorded on October 31st.


This resurgence can be largely attributed to the weakening of the US dollar, following indications that the Federal Reserve's period of monetary tightening might be drawing to a close.

In Canada, the inflation rate took a surprising dip to 3.1% in October, a figure notably lower than the Bank of Canada's projected rate of about 3.5% for the upcoming year. This decrease in inflation, when viewed alongside the slowing pace of the Canadian economy, is fueling speculation that the Bank of Canada might put a pause on any further increases in interest rates.​

What to Expect Next Week - Nov 27th

The US will have a busy week with many important economic indicators and events. The main ones are:​
  • PCE prices, personal income and spending: These will show how much inflation, income and consumption changed in October. They are closely watched by the Fed and the markets as they reflect the health of the economy and the impact of the pandemic.​
  • ISM Manufacturing PMI: This will measure the activity and sentiment of the manufacturing sector in November. A reading above 50 indicates expansion, while below 50 signals contraction. The manufacturing sector has been recovering from the Covid-19 shock, but faces challenges from supply chain disruptions and labor shortages.​
  • Fed speeches: Several Fed officials, including Chair Powell, will speak at different events throughout the week. They will likely provide more insights into the Fed's views on the economic outlook, inflation, and the tapering of its asset purchases.​
Other notable releases and events in the US include:​
  • CB Consumer Confidence: This will gauge the level of confidence and optimism of consumers in November. Consumer confidence is a key driver of spending and growth, especially during the holiday season.​
  • Q3 GDP growth rate (2nd estimate): This will revise the preliminary estimate of the annualized growth rate of the US economy in the third quarter. The first estimate showed a 2% increase, below market expectations of 2.6%.​
  • New and pending home sales: These will report the number of new and existing homes sold in October. They are indicators of the demand and supply conditions in the housing market, which has been affected by rising prices, low inventory, and higher mortgage rates.​
  • Q3 corporate profits: This will reveal the earnings of US corporations in the third quarter. Corporate profits are a measure of the profitability and performance of the business sector.​
Meanwhile, other countries and regions will also have some significant developments to watch. These include:​
  • Monetary policy decisions: The central banks of South Korea and New Zealand will announce their interest rate decisions. Both are expected to keep their rates unchanged, but may signal their future policy stance amid rising inflation pressures and Covid-19 risks.​
  • Speeches from ECB and BoJ officials: Several officials from the European Central Bank and the Bank of Japan will deliver speeches at various occasions. They will likely comment on the economic situation and outlook of their respective regions, as well as their monetary policy actions and plans.​
  • Inflation rates: Several countries and regions will release their inflation data for October. These include Germany, the Euro Area, France, Italy, Spain, the Netherlands, Poland, and Australia. Inflation has been rising globally due to higher energy and commodity prices, supply chain bottlenecks, and pent-up demand.​
  • GDP growth rates: Some countries will publish their GDP growth rates for the third quarter. These include Turkey, India, Canada, and Switzerland. These will show how their economies performed amid the pandemic and its variants, as well as the vaccination progress and the fiscal and monetary support.​
  • China's Manufacturing and Services PMIs: These will indicate the level of activity and confidence of the manufacturing and services sectors in China in November. China's economy has been slowing down due to the Delta variant, regulatory crackdowns, power shortages, and debt woes.​
  • Manufacturing PMIs: Other countries will also release their manufacturing PMIs for November. These include South Korea, India, Russia, Italy, and Canada. These will reflect the state and outlook of the manufacturing sector in these countries, which are influenced by the global demand and supply conditions.​
  • Germany's GFK consumer confidence and retail sales: These will measure the confidence and spending of German consumers in November and October, respectively. Germany is the largest economy in the Euro Area and its consumer behavior has implications for the rest of the region.​

Turkish Lira Hits Record Low Despite Aggressive Rate Hikes

The Turkish lira remains stagnant at an all-time low, sitting at 28.9 against the US dollar. This comes even after Turkey's central bank made an unexpected move, raising interest rates significantly by 500 basis points in its latest November meeting. This decision surpassed investors' expectations, who had predicted a rise of only 250 basis points.


Trend of Depreciation

In the last three months, the Turkish lira has been on a steady decline, setting new daily lows. The average daily loss has been slightly over 0.1%. This pattern suggests a controlled devaluation, likely orchestrated by the central bank. To manage this situation, the bank has implemented stricter reserve requirements for the lira. This step is aimed at pulling liquidity from the interbank market, thereby increasing local interest rates and aligning them more closely with the costs of borrowing lira internationally.

A Steep Drop in Value

Since the beginning of 2023, the Turkish lira has seen a dramatic depreciation, losing over 50% of its value when compared to the US dollar. This significant drop highlights the ongoing economic challenges faced by Turkey.​

AUDUSD Bullish Trend: A Closer Look at the Rising Tide

The current trading session has witnessed a significant rise in the AUDUSD's value. Notably, the Australian dollar (AUD) has broken above the crucial 50% Fibonacci retracement level, a move that aligns with the top edge of the bullish flag pattern on the daily chart.

As the Relative Strength Index (RSI) edges closer to overbought conditions, the AUDUSD pair might be gearing up for a phase of range-bound trading, especially above the 65.8% resistance level. Given the heightened demand driving up the AUDUSD price, now may not be the best time for investors to take on long positions.


A Word of Caution for Retail Investors​

Retail traders should approach with caution. A prudent strategy would be to wait for the AUDUSD pair to dip back to the midpoint of the bullish flag pattern. This area, coinciding with the 38.2% Fibonacci level, presents a potentially favorable entry point for those looking to buy.​
GBPJPY: A Strong Bullish Momentum

During the most recent trading session, the GBPJPY pair maintained its upward trajectory, achieving a significant milestone by surpassing the median line of its bullish flag pattern. This development strongly highlights a continued positive trend for GBPJPY, signaling a robust bullish momentum.


With this upward movement, the focus for traders is now set on the GBPJPY pair reaching the upper boundary of the bullish flag. This target is the next critical point for the ongoing bullish trend.

The prevailing trend for GBPJPY can be described as distinctly bullish, especially as the pair remains actively trading within the boundaries of the bullish flag. This trend is expected to persist as long as the pair continues its movements within this pattern.​
GBPUSD Soars: Overbought Signals Emerge

Solid ECN - Today's trading session saw the GBPUSD climb sharply. The pair broke through the top boundary of its bullish trend, indicating strong buying interest. At the same time, the RSI indicator moved into an area typically considered overbought, while the Awesome Oscillator pointed towards a possible divergence. These signals hint at a potential downward adjustment in the GBPUSD's price in the next trading session. It's expected that the pair might give back a portion of its recent gains, possibly retesting the 23.6% Fibonacci level and then maybe the 38.2% level.


Moreover, these levels could act as appealing entry points for buyers looking to capitalize on the uptrend, suggesting the bullish momentum may persist.​
The Yuan's Balancing Act: Stability Amidst Economic Shifts

The offshore yuan has recently found stability around 7.15 per dollar, maintaining its position near a four-month high. This stability is largely influenced by the People's Bank of China's (PBOC) commitment to keeping the currency steady, as highlighted in their latest quarterly policy report. The PBOC has emphasized its dedication to correcting market trends that could potentially destabilize the yuan, addressing disruptive market behaviors, and preventing excessive fluctuations. This stance comes as the yuan has experienced a rally, partly due to the PBOC's strategy of setting strong midpoint rates, a move analysts see as a deliberate effort to bolster the currency.

Investors are now keenly awaiting new data on China's manufacturing activities, which could provide further insights into the yuan's trajectory. Additionally, recent statistics indicate a decline in industrial profits within China, though the rate of decrease has slowed, marking the least significant drop in almost a year.

These developments are creating opportunities for investors with a bullish outlook, offering them favorable prices to initiate new long positions, which could sustain the ongoing positive trend in the yuan's value.​
GBPJPY Update: Bullish Flag Dynamics and Key Resistance Levels

The GBPJPY currency pair recently reached the R2 resistance level but then dropped back to the middle of its bullish flag pattern. This pattern indicates a generally upward trend, with R1 serving as a key support level. If the currency pair breaks above the R2 level, its next goal might be reaching R3, which is in line with the top edge of the flag.


As long as the R1 level remains unbroken, it supports the upward trend. However, if this support level is breached, there's a chance that the GBPJPY pair could fall towards the lower boundary of the flag, a movement further backed by the monthly pivot point.​
Germany's Import Prices: A Continuing Decline

In October 2023, Germany saw a continued decrease in the cost of imported goods, marking the eighth month of this trend. The reduction in import prices was 13.0%, slightly less than the anticipated 13.4%. This ongoing drop stems largely from the high prices experienced in 2022 due to the conflict in Ukraine. The biggest decrease was in energy imports, which were 43.5% cheaper than the previous year. This includes significant reductions in the prices of natural gas, hard coal, electricity, mineral oil products, and crude oil. Intermediate goods and agricultural products also saw price drops, as well as both durable and non-durable consumer goods, albeit to a lesser extent. On the flip side, the cost of capital goods actually went up a bit.

For a catchy and visually appealing representation of this topic, I would suggest an image that creatively illustrates the decline in import prices in Germany. It could depict a downward graph or arrow, symbolizing the price reduction, set against a backdrop of key items such as energy sources and consumer goods. The overall tone should be informative yet engaging.​
GBPUSD Sees Strong Uptrend, Caution Advised for Long Positions

The GBPUSD currency pair recently began a stronger upward movement, surpassing its previous bullish trend. As of now, it's trading near 1.2703, with the RSI indicator indicating an overbought condition for nearly a day. Our previous technical analysis of GBPUSD cautioned that the pair was overbought, advising against long positions for retail traders. This advice remains relevant and applicable.


For investors considering going long, the 1.260 level presents a good and fair entry point, should there be any price adjustments in the GBPUSD pair.​
EURUSD Fundamentals

FxNews - On Wednesday, the Euro struggled to maintain its strength above the 1.1000 level against the US Dollar, ultimately retreating to around 1.0990 as trading began in Europe. Conversely, the US Dollar, referred to as the Greenback, is wavering around 102.70, despite recovering from earlier dips in the 102.50-102.45 range, as indicated by the USD Index (DXY).

The current monetary policy landscape remains stable for now. However, investors are speculating about potential interest rate reductions by the Federal Reserve (Fed) and the European Central Bank (ECB) come spring 2024.

Attention in the Eurozone is now turning towards Germany's forthcoming release of preliminary inflation data for November. Meanwhile, in the US, the spotlight is on several key economic indicators, including the advanced Q3 GDP Growth Rate, preliminary figures for Goods Trade Balance, and Mortgage Applications as monitored by the MBA. The day in North America will conclude with the publication of the Fed's Beige Book.

Adding to this, Cleveland Fed's Loretta Mester, a hawkish figure and 2024 voter, is scheduled to speak, potentially offering further insights into future economic policies.​

US Stock Futures Rise: A Sign of Economic Optimism

On a recent Wednesday, the US stock market showed signs of optimism before the market opened. Futures, which are contracts to buy or sell assets at a later date for a price agreed upon now, indicated an upward trend. Both the S&P 500 and the Dow Jones, two major stock market indices, were expected to rise by approximately 0.3%. The Nasdaq 100 futures, representing a third significant index, were poised to see an even more substantial increase of nearly 0.4%.

Factors Influencing the Market

Several factors contributed to this positive outlook. First, comments from officials at the Federal Reserve, the central bank of the United States, suggested a more accommodating monetary policy. They hinted that the period of increasing interest rates might be over, raising hopes of reduced borrowing costs in the coming year. This change in tone from the Fed can make it cheaper for individuals and businesses to borrow money, potentially stimulating economic activity.

Additionally, a decrease in Treasury yields, which are the returns on government securities, was seen as favorable for stocks. Lower yields often make stocks more attractive to investors compared to bonds.

Key Economic Indicators and Corporate News

Investors were also anticipating the release of revised figures for the US Gross Domestic Product (GDP) growth and initial data on corporate profits. GDP growth rate is a crucial indicator of the overall health of the economy, reflecting the total value of goods and services produced over a specific period. Positive GDP growth suggests a thriving economy, while a decline can indicate economic challenges.

On the corporate side, General Motors (GM) saw its shares jump over 5% in premarket trading. This surge was a reaction to the company's announcement of a $10 billion share buyback program, indicating confidence in its future financial performance. In contrast, shares of Las Vegas Sands, a major hospitality and gaming company, fell by about 5% after news that its largest shareholder planned to sell $2 billion worth of shares.

Assessing the Economic Implications

The overall sentiment in the US stock market on this day was positive, which is generally beneficial for the economy. Rising stock prices can increase wealth for investors and boost consumer confidence, leading to more spending. When companies like GM announce significant share buybacks, it often reflects their confidence in their financial health, which can further stimulate economic growth.

However, large sales of shares, like in the case of Las Vegas Sands, can sometimes raise concerns about a company's future prospects, potentially impacting investor confidence.

Impact on the Economy

  • Positive Indicators: Higher futures, dovish Federal Reserve comments, and rising corporate shares like those of GM are all positive signs for the economy. They indicate investor confidence and a potentially growing economy.​
  • Cautionary Signs: Large share sales and fluctuations in key economic indicators like GDP growth and corporate profits require careful monitoring as they can signal shifts in economic stability.​
EURUSD: Testing the Waters at 1.096

In the EURUSD market, the bears are currently putting pressure on the 1.096 support level. At the same time, the RSI indicator has exited the overbought zone, yet there's a noticeable divergence present. If the EURUSD manages to stay above 1.0963, the market sentiment is likely to remain bullish.


However, if the price of EURUSD dips below 1.0963, this bullish trend may pause. In this case, the focus will shift to how the market responds to the pivot point, which is also backed by the lower boundary of the bearish channel.​
USDCAD Eases Selling Pressure, Eyes 1.35 Level

Today, the USDCAD experienced a reduction in selling pressure, settling below the flag's median line. The pair is now finding its footing below the middle line, around the 64.8% Fibonacci level on the 4-hour chart. A bearish movement towards 1.35 is anticipated, matching the 78.6% Fibonacci level.


A closer look at the 4-hour USDCAD chart reveals a divergence in the Awesome Oscillator with its bars turning green, while the RSI indicator suggests the likelihood of a price correction. The pair is currently restrained by the 23.6% Fibonacci level, which is preventing it from recovering more of its recent losses.


As long as it stays below this level, the price is expected to fluctuate within the 1.35 to 1.36 range.​

How Hong Kong's Retail Sector Slowed Down in October

In October 2023, Hong Kong's retail sector grew by only 2.7% compared to the same month last year. This was a big drop from the 10.0% growth rate in September 2023. It was also the lowest growth rate since December 2022.

One of the main reasons for this slowdown was the decline in sales of some essential items, such as food, drinks, tobacco, fuels, and consumer durable goods. These items are usually bought by local residents for their daily needs. However, due to the high inflation and the COVID-19 pandemic, many people reduced their spending on these items.

Another reason was the weak demand for luxury goods, such as jewellery, watches, clocks, and valuable gifts. These items are usually bought by tourists and wealthy customers. However, due to the travel restrictions and the political unrest, many tourists and investors stayed away from Hong Kong.

On the other hand, some categories of retail sales still performed well in October 2023. These included clothing, footwear, and other consumer goods. These items are usually bought by young and fashionable customers. They also benefited from the online shopping platforms and the festive promotions.

Compared to September 2023, retail sales increased by 6.1% in October 2023. This was mainly because of the seasonal factors and the low base of comparison. However, this increase was not enough to offset the year-on-year slowdown.

The Impact of Retail Sales on the Economy

Retail sales are an important indicator of the economic health of a country or a region. They reflect the level of consumer confidence, income, and spending. They also affect the employment, tax revenue, and business activity of the retail sector.

Therefore, the slowdown in retail sales in Hong Kong could have a negative impact on the economy. It could reduce the income and profits of the retailers and their suppliers. It could also lower the tax revenue and the public spending of the government. It could also discourage the investment and the innovation of the retail sector.

However, the slowdown in retail sales could also have some positive effects on the economy. It could encourage the consumers to save more and spend less. It could also motivate the retailers to improve their efficiency and quality. It could also stimulate the diversification and the transformation of the retail sector.​
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